Saturday, September 30, 2023

Bluebell Capital activist fund targets Danone

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An activist investor has taken a stake in yogurt maker Danone and is demanding the replacement of Chairman and CEO Emmanuel Faber because of what he described as “disappointing” about the action.

Bluebell Capital Partners, a London-based hedge fund founded by Francesco Trapani, the former chief executive of Bulgari, did not disclose the size of the stake it formed late last year. The fund would only be required to make a public disclosure if it crossed the 5% threshold that triggers a filing with the French market regulator.

In mid-November, Bluebell sent a letter calling on the board to start looking for a new CEO and recommending that the roles of chairman and CEO be split.

“The underperformance of Danone’s share price was driven, in our opinion, by a combination of poor operating results and questionable capital allocation choices,” wrote the fund in the letter consulted by the Financial Times.

The fund also pointed out that Danone’s total shareholder return has been lagging behind its major competitors Nestlé and Unilever since Mr. Faber took over in October 2014. His shares have risen 2.7% since then. then, while those of Nestlé increased by 45% and Unilever by 72%. .

Asked about the arrival of the activist fund, Danone said: “We appreciate a constructive dialogue with all of our shareholders. Danone’s management team is strongly focused on creating long-term sustainable value. ”

He defended Danone’s “good results” under the leadership of Mr. Faber, highlighting an average organic growth in sales of 3.1% and growth of 50% in earnings per share from 2014 to 2019.

Bluebell’s arrival comes at a difficult time for Danone. Its bottled water business, best known for the Evian and Volvic brands, has suffered during closings, depriving it of its most profitable sales in restaurants, bars and convenience stores. Meanwhile, the cost of transportation, raw materials and logistics have increased.

To deal with it, Mr. Faber announced a major reorganization of the company in October that will lead to no less than 2,000 job cuts. He also committed to sell assets and prune the product portfolio.

Some investors are also skeptical of Mr. Faber’s emphasis on the environment and social goals, and frustrated by Danone’s inability to meet its financial goals. In June, shareholders voted for Danone to become a so-called enterprise with mission, or goal-oriented business, aimed at bringing “health through food” to consumers.

Legal status requires Danone not only to generate profits for its shareholders, but to do so in a way that it believes will benefit the health of its customers and the planet.

Bluebell said he supported the dual purpose, but added: “However, we believe that under Mr. Faber’s leadership Danone has failed to strike the right balance between creating shareholder value and durability.”

The fund, whose previous campaigns have included Lufthansa and Hugo Boss, highlighted how Unilever and Nestlé are also “extremely committed to sustainability” while achieving better returns for shareholders than Danone.

Activist campaigns have been on the rise in France in recent years, even if they remain rarer than in the United States or the United Kingdom. Hedge funds such as Elliott Management and Amber Capital have mounted campaigns in blue chip companies such as Capgemini and Pernod Ricard who were once considered untouchable.

This led the government last year to put tighter controls on short sellers and activists, but ultimately measures introduced were quite modest, requiring better disclosure.

French economic magazine Challenges first reported on Bluebell’s investment in Danone.

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